WTO Issues 2008 World Trade Report

The report explores a range of questions, including (partial list): (1) why some countries have managed to take advantage of falling trade costs and greater policy-driven trading opportunities while others have remained largely outside international commercial relations; (2) who the winners and losers are from trade; and (3) what complementary action policy-makers need to take in order to secure the benefits of trade for society.

Highlights of Report's Conclusions

The following are highlights of the report's conclusions:

World trade decelerated in 2007. Growth in world output and trade decelerated in 2007. Weaker demand in the developed economies reduced global economic growth to 3.4% from 3.7%, roughly the average rate recorded over the last decade.

Support for trade waning in industrialized countries. Support for globalization appears to be waning in the industrialized countries even though it still enjoys the support of a majority of the public. Seemingly, stronger support exists for trade in some emerging economies than in industrial countries.

Developing countries grew more. At approximately 7%, growth in the developing regions was nearly three times the rate recorded in the developed regions, and the contribution of the developing countries to global output growth in 2007 exceeded 40%. Economic expansion in the least-developed countries fully matched the growth rate recorded by developing countries as a group in 2007, sustaining a pattern that has been maintained since 2000.

Trade has experienced long-term shift. A long-term shift in the composition of world merchandise trade has occurred, including a great dilution of the domination of developed countries in world exports of manufactures, first in labor-intensive goods (such as textiles and clothing) and subsequently in electronic products and capital-intensive goods (such as automotive products).

Falling international trade costs. Empirical evidence shows an overall downward trend in trade costs in the last half century including policy barriers (tariffs and non-tariff barriers), transportation costs (freight and time costs) as well as communication costs and other information costs, enforcement costs, exchange rate costs, legal and regulatory costs and local distribution costs.

Transport costs are higher than tariff costs. Transportation costs are estimated to be typically higher than tariffs. According to a 2004 study, aggregate expenditure on shipping for total imports was three times higher than aggregate tariff duties paid.

Exporting firms are fewer but more productive. Recent firm-level empirical evidence shows that: (a) most firms, even in traded-goods sectors, do not export at all; (b) of those firms that export, only a few export a large fraction of their production; (c) at the same time, at least some firms export in every industry, with the share of exporting firms being a function of the industry's comparative advantage; (d) firms that export are different from non-exporters in a number of ways (they are bigger, more productive, pay higher wages and are more capital and skilled labor intensive than non-exporters); and (e) trade liberalization raises industry productivity.

Importance of national policies on infrastructure, regulatory reform. While the theoretical and empirical case for the gains from trade is strong, certain factors have the potential to reduce those gains or to skew their distribution. In addressing trade costs and supply constraints that diminish potential gains from trade, much depends on national policy action. Public investment to enhance physical infrastructure is key, as is a willingness to lower trade costs through trade and regulatory reform.

Low income countries' policies may disadvantage them. While offshoring is on the rise, low-income countries may be at a significant disadvantage when it comes to participation in international production networks depending on: the quality of institutional frameworks, the costs of establishing a business and the quality of infrastructure.

Benefits of multilateral negotiations, reducing trade costs. In the context of the WTO, trade opening (including the Doha Round), actions to reduce trade costs, and the implementation of multilateral agreements can all contribute to enhanced opportunities to gain from trade. The report notes that some negotiations, such as the market access negotiations in agriculture and non-agricultural market access offer the possibility of coordinated trade opening, where governments gain from both their own reduced trade costs and those of others.

World Trade Report 2008: Trade in a Globalizing World available at http://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report08_e.pdf

WTO press release (dated 07/15/08) available at http://www.wto.org/english/news_e/pres08_e/pr534_e.htm